80% OF UK MEDIA IS OWNED BY PEOPLE WITH A CENTRE RIGHT AGENDA TRUENEWS SEEKS TO REDRESS THE BALANCE

Friday, 27 September 2013

tories , seek to block bonus cap

A plan to cap bankers’ bonuses will be tested in Europe’s top court after the U.K. government challenged the measure, claiming it would increase financial risks rather than reduce them.

EU policymakers are hoping to limit bonuses for any banker earning more than 500,000 euros a year. The maximum payout would be equal to annual salary or twice salary if a majority of shareholders approve.

The cap will apply globally to banks based in the EU, and to international banks operating within Europe. It could affect more than 35,000 bankers around the world, the vast majority of them in London.

The European Commission believes the cap — introduced as part of a broader package of rules aimed at making the financial system more stable — will reduce short-term risk taking.

But the U.K. is concerned that it will prompt banks to offer their high-flyers bigger fixed salaries to compensate for the cap, undermining initiatives already undertaken to link banker pay more closely to long-term success.

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“These latest EU rules on bonuses, rushed through without any assessment of their impact, will undermine all of this by pushing bankers’ fixed pay up rather than down, which will make banks themselves riskier rather than safer,” said a U.K. Treasury spokesperson.

The U.K.’s challenge will claim that the proposal lacks proper legal grounding, fails to protect personal data, extends the power of the European Banking Authority beyond its technical brief, and should not be applied outside Europe.